OECD...آ  ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT The OECD is a unique forum where the

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  • ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

    Agricultural Policy and Trade Reform

    POTENTIAL EFFECTS AT GLOBAL, NATIONAL AND HOUSEHOLD LEVELS

    001.fm Page 1 Wednesday, June 14, 2006 4:55 PM

  • ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

    The OECD is a unique forum where the governments of 30 democracies work together to address the economic, social and environmental challenges of globalisation. The OECD is also at

    the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an

    ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate

    domestic and international policies.

    The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic,

    Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic,

    Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The Commission of the European Communities takes part in the work of the OECD.

    OECD Publishing disseminates widely the results of the Organisation’s statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and

    standards agreed by its members.

    Also available in French under the title :

    Réformes des politiques agricoles et commerciales

    © OECD 2006

    No reproduction, copy, transmission or translation of this publication may be made without written permission. Applications should be sent to

    OECD Publishing: rights@oecd.org or by fax (33 1) 45 24 13 91. Permission to photocopy a portion of this work should be addressed to the Centre

    français d'exploitation du droit de copie, 20, rue des Grands-Augustins, 75006 Paris, France (contact@cfcopies.com).

    This work is published under the responsibility of the OECD Committee for Agriculture.

    002.fm Page 1 Wednesday, June 14, 2006 4:58 PM

    RÉPERCUSSIONS POTENTIELLES AU NIVEAU MONDIAL, AU NIVEAU NATIONAL ET SUR LES MÉNAGES

  • Foreword – 3

    AGRICULTURAL POLICY AND TRADE REFORM: POTENTIAL EFFECTS AT GLOBAL, NATIONAL AND HOUSEHOLD LEVELS – ISBN-92-64-02573-1 © OECD 2006

    Foreword

    Reducing agricultural trade protection and trade distorting budgetary support to farmers have long featured prominently among the shared goals of OECD member countries. Reforming agricultural policy is viewed as desirable, not only because of the net gains in global economic welfare it engenders, but also because it improves the prospects for progress in global trade negotiations more generally. Although cutting tariffs, export subsidies and domestic farm supports would lead to net gains in overall economic welfare for most countries, some developing countries may lose overall, and within most countries there are likely to be some sectors and households that are adversely affected.

    This report attempts to quantify the likely distributional consequences of a widespread and simultaneous reduction in trade protection and agricultural domestic support. The first part of the analysis examines the implications for global commodity markets, for national economic welfare, and for sectoral terms of trade for an extensive list of individual countries and regions. The second part of the study tracks these aggregate impacts down to the household level for five case study countries: Brazil, Italy, Malawi, Mexico and the United States, considering the implications for net household incomes in each case.

    The study was carried out by the OECD Directorate for Food, Agriculture and Fisheries. The principal authors are Joe Dewbre and Jonathan Brooks. Hsin Huang and Frank van Tongeren contributed the analysis of global, national and sectoral impacts based on simulations with the GTAPEM model. Pete Liapis contributed the AGLINK analysis of global commodity market impacts.

    The authors and affiliations of the various country case studies are as follows:

    • Brazil: Carlos R. Azzoni, Tatiane A. Menezes, Fernando G. Silveira, Eduardo A. Haddad, Joaquim M. Guilhoto, Heron C.E. Carmo (University of São Paulo and FIPE, Brazil) and Scott McDonald (University of Sheffield).

    • Italy: Riccardo Magnani (University of Cergy-Pontoise) and Federico Perali (University of Verona and CHILD).

    • Malawi: Andrew Dorward, Jamie Morrison and Colin Poulton (Centre for Development and Poverty Reduction, Imperial College, London), and Hardwick Tchale (University of Malawi).

    • Mexico: J. Edward Taylor (Department of Agricultural and Resource Economics University of California, Davis), Antonio Yúnez-Naude and George Dyer-Leal (PRECESAM and Economic Studies Center, El Colegio de Mexico, Mexico DF).

    • United States: Mary E. Burfisher, Kenneth Hanson, Jeffrey Hopkins and Agapi Somwaru (U.S. Department of Agriculture, Economic Research Service).

    Michèle Patterson provided editorial assistance and coordinated the publication process.

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  • Table of Contents – 5

    AGRICULTURAL POLICY AND TRADE REFORM: POTENTIAL EFFECTS AT GLOBAL, NATIONAL AND HOUSEHOLD LEVELS – ISBN-92-64-02573-1 © OECD 2006

    Table of Contents

    Executive Summary ............................................................................................................................... 7

    Part I. Global, National and Household Level Effects of Trade and Agricultural Policy Reform ........................................................................................... 15 Introduction............................................................................................................................................ 17 Chapter 1. Extent and Composition of Agricultural Support and Trade Protection ........................... 19 Chapter 2 Global Market, National and Sectoral Impacts ................................................................. 29 Chapter 3. Household Level Impacts .................................................................................................. 51 Chapter 4 Conclusions and Policy Inferences.................................................................................... 73 Annex I.1 Overview of the GTAPEM Model .................................................................................... 77

    Part. II Case Study Summaries of Household Level Impacts ......................................................... 83 Chapter 5. Brazil ................................................................................................................................. 85 Chapter 6. Italy.................................................................................................................................. 107 Chapter 7. Malawi............................................................................................................................. 115 Chapter 8. Mexico............................................................................................................................. 131 Chapter 9. United States ................................................................................................................... 143

    References............................................................................................................................................ 155

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  • Executive Summary – 7

    AGRICULTURAL POLICY AND TRADE REFORM: POTENTIAL EFFECTS AT GLOBAL, NATIONAL AND HOUSEHOLD LEVELS – ISBN-92-64-02573-1 © OECD 2006

    Executive Summary

    This study looks into the implications of reducing agricultural trade protection and trade distorting domestic support, with a focus on the level and distribution of income across nations and within countries. The findings corroborate those obtained in many previous studies, showing that such policy reform would improve both global economic welfare and the welfare of the countries implementing such reforms. Other exporting countries would also benefit when world agricultural commodity prices increase in the process. Of course, those same price increases can lead to overall net losses for some countries that rely heavily on agriculture and food imports. In all countries, there will be some sectors and households that gain and others that lose.

    Agricultural policy reform is difficult to achieve, perhaps in part because those who fear they would lose are able to block or water down reform initiatives. Indeed, except as dictated by economic emergency, successful agricultural policy reform has rarely been achieved without accompanying arrangements to compensate some of the losses and to assist those negatively affected to adjust to reform-induced changes in their economic environment.

    Implementing policy reform usually requires that policy makers not only understand the benefits of doing so, but also that they can identify those who stand to lose, quantify their potential losses, and then design policies that make policy reform politically feasible. Policy makers increasingly recognize that it is not enough to assert that there are potential global gains from policy reform; it is also necessary to ensure that gains are realised and widely shared, that

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